For-profit colleges raise controversy

In a TV commercial for Everest College, a for-profit school with campuses across the U.S. and also in Canada, a man stands in a dimly lit parking lot speaking enthusiastically to viewers. As the school’s 1-800 number scrolls across the bottom of the screen, he says, “You’re sitting on your couch and watching TV, and letting your life pass you by.” He then tell viewers to check out Everest, claiming that classes can be adapted to fit anyone’s schedule, and that nobody has an excuse to not learn more.

But what this commercial doesn’t tell you is that while Everest might get you off the couch, it won’t necessarily get you a high-paying job, let alone any job at all.

Recently for-profit colleges, such as Everest, have been scrutinized for their recruiting tactics, with critics saying the schools exaggerate their benefits and promise students high-salary jobs. In August 2010, the U.S. Government Accountability Office conducted an undercover investigation into possible fraudulent and unethical behavior by for-profit colleges. According to their report, four separate for-profit colleges encouraged fraudulent practices. One school even had a representative encourage an applicant to remove over $200,000 of personal savings to pay for classes.

According to the Department of Education, $24 billion of federal financial aid was allocated to students at for-profit colleges in 2009. More than 40 percent of those students defaulted on their loans, according to The Chronicle of Higher Education.

Only 11 percent of students in public and private colleges defaulted on loans, according to the Department of Education. Western’s projected loan default rate for 2011 is one of the lowest in the country, at 1.2 percent, according to Financial Aid Director Clara Capron. While this number cannot be confirmed until next fall, she said that the rate is down from 1.4 percent in 2008.

“The economy has been in crisis and to actually receive word that our rate has lowered is a pleasant surprise,” Capron said. “That just shows that Western students are able to keep up with their loan payments upon graduation.”

Unlike state institutions such as Western or the University of Washington, for-profit colleges rely solely on revenue from student tuition. For-profit colleges also appeal to non-traditional students, such as single parents who need flexible hours or those who could not get accepted into state universities because of bad grades or other disparities holding them back.

Associated Students Vice President for Governmental Affairs Byron Starkey said that while for-profit colleges rightfully have a place in the American education system, the controversy surrounding them is too severe to ignore.

For example, Apollo Group Inc., the company that owns the University of Phoenix, made more than 600 million dollars last year, Starkey said.

The problem is the fact that 80 to 90 percent of that revenue is from student federal loans, all of which come from the Department of Education, allowing for-profit colleges to collect millions of dollars of taxpayer money, he added.

“All of the loans and forms of financial aid that Western students receive are from the same pool or pot of money that is being used to increase the profit margins for those for-profit colleges,” Starkey said.

To assist with this issue, in 1998 federal regulators enacted the “90/10 rule” which requires for-profit colleges to account for the amount of money they take in from loans. The rule sets a limit on such colleges, allowing them to only receive up to 90 percent of their revenue from the Department of Education. Even with this rule, Starkey said larger companies have been abusing it by peaking at nearly 89 percent.

According to the GAO, for-profit college programs are also much more expensive than public institutions. For a bachelor’s degree in a field such as construction management, a student at a for-profit college spends more than $60,000 on average, compared to a student at public college who spends less than $30,000.

For-profit colleges have also been criticized for inaccurately representing the product they are selling to students, Starkey said. Many for-profit college students graduate with certificates and degrees, then struggle to find jobs after their hard work in school and the thousands of dollars they spend on loans, he said.

The Department of Education plans to deal with this issue with a new gainful employment rule, which, once enacted in June of this year, will require for-profit colleges to be more transparent regarding their ability to provide students with employment after graduation.

The United States Student Association, the largest advocacy group for college students in the nation, brought up these issues surrounding for-profit colleges last year.

Jake Stillwell, communications director of the USSA, said the purpose behind stronger regulation is to assist the students who have been taken advantage of by for-profit schools. He added that all college students who seek federal funding are affected by this issue and they should care about what happens.

“A few bad apples have egregiously taken advantage of these students and those are the ones who these regulations target,” Stillwell said. “All students should care about this issue because a lion’s share of federal financial aid dollars go to students who enroll, and eventually default, from for-profit colleges.”

While the AS Legislative Affairs Council included a resolution about for-profit colleges in the 2011 AS Federal Legislative Agenda, Starkey said the issue is not a priority for the AS but rather a conversation they simply want to start. Other issues affecting Western students, such as the reduction of federal Pell Grants, are more important, he added.

Capron said that keeping track of expenses and preparing for life after graduation are two of the most important things students can do while attending college, although the quality of the education they are receiving should also not be forgotten.